General Motors India defers Halol plant closure until March 2017

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Halol/Gandhinagar/Ahmedabad: After announcing in July 2015 that it would shut its plant in Halol, Gujarat, General Motors India Pvt. Ltd has now said it will extend production at the plant until March 2017 even as it continues to review future options for the site.

According to GM India president and managing director Kaher Kazem, this move gives more time to ensure an orderly transition for employees, suppliers and other stakeholders as the company continues to work through options for the facility.

The announcement comes after a series of flip flops over the last one year about the company’s decision to close down the plant.

Mary Barra, chief executive of General Motors Co., the US parent, had in July last year announced plans to invest $1 billion in the country, primarily for setting up a new factory at Talegaon and shifting the Gujarat operations.

Following this, the company assured irate factory workers, while also informing some senior executives in an internal communication that activities at the plant would continue till March.

“The company had moved an application for closure of the plant sometime in September. There were a few hearings, after which the company said it would like to keep its plans for ceasing production ‘on hold’. Since there is no provision in the law to keep a closure application suspended, we returned their application and asked them to file a fresh one whenever they intend to close down. As of now, there is no application from General Motors for closure or for ceasing of production at its Halol factory,” said M. Thennarasan, Gujarat’s labour commissioner.

Any company that plans to shut an operation that has over 100 employees has to take permission from the labour commissioner’s office, said another government official familiar with the matter. “The company (General Motors India) failed to give a solid reason for the closure of their Gujarat factory in the three hearings that were held following their closure application,” this official said.

General Motors has invested close to Rs.1,200 crore in its Halol plant, which began operations in 1996 and currently manufactures the Tavera and Enjoy multi-utility vehicles and the Cruze sedan under the Chevrolet brand. It has received incentives amounting to Rs.800 crore from the government of Gujarat, the home state of Prime Minister Narendra Modi.

The factory at Halol, 50km from Vadodara, is one of two General Motors facilities in India and has a capacity to manufacture 127,000 cars a year. The other factory—at Talegaon in Maharashtra—can manufacture 160,000 units annually.

The automaker’s plan to shut the Halol factory has drawn flak from the state and central governments. The Gujarat chief minister’s office questioned the move, saying General Motors had reaped benefits from the state for two decades and that the plant had been very successful.

“We were told last month (May) by the top management that the plant will not cease production in June and will continue at least till August,” said Rachit Soni, a worker at the Halol plant and president of the General Motors Employees’ Union, Halol.

The Halol factory currently employs around 1,000 people, down from 1,150 after some employees opted to move to the Talegaon facility following the announcement of the company’s plans last year.

Executives of General Motors India and China’s SAIC Motor Corp. Ltd met Gujarat government officials in December. SAIC executives also visited the Halol site to assess the value of the property and the company was evaluating a deal, estimated at Rs.1,500 crore, but had not arrived at a decision yet, said an industry official familiar with the company’s India plans.

The Tavera factor

Another major reason for the automaker to go back on its decision to close the Halol operations is the success of the Chevrolet Tavera relative to its other models, said a senior executive familiar with the matter.

GM India has now confirmed that in coming months it would begin production of the upgraded Tavera at the Halol assembly plant.

“GM India will continue with our plan to consolidate manufacturing at our Talegaon plant,” said Kazem.

The Tavera contributes more than one-third of General Motors’ India sales and has been its flagship product since it was launched in 2003. The Tavera and the Enjoy—both manufactured in Halol—together account for more than half the company’s sales in the country.

The Tavera has, however, seen a spate of setbacks in recent years, with General Motors announcing in July 2013 the recall of as many as 114,000 units to address issues related to emissions and specifications.

The recall was applicable to Tavera BS III (2.5 litre variant) and BS IV (2 litre variant) vehicles sold between 2005 and 2013, the company had said in a statement then.

This was the first recall by the local subsidiary of the US car maker since it established a presence in India in 1996.

And in the year to 31 March, sales of the Tavera dropped 22%. Sales of the Enjoy fell 43% in the same period.

The company has a stockpile of around 5,000 cars at its Halol facility. It plans to slowly phase out the Enjoy, creating more space for manufacturing the BS IV-compliant Tavera, said a vendor to General Motors.

BS IV emissions norms will be implemented across the country from April 2017.

Last week, the auto maker said it had decided not to launch its Chevrolet Spin multi-purpose vehicle in India next year. The firm said it is instead working on a new soft-roader, based on the Beat Activ concept showcased earlier this year at the Auto Expo.